Income Statements under Absorption and Variable Costing Shawnee Motors Inc. asse
ID: 2400700 • Letter: I
Question
Income Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August:
If required, round interim per-unit calculations to the nearest cent.
a. Prepare an income statement according to the absorption costing concept.
b. Prepare an income statement according to the variable costing concept.
Sales (9,500 units) $855,000 Production costs (12,000 units): Direct materials $399,600 Direct labor 192,000 Variable factory overhead 96,000 Fixed factory overhead 63,600 751,200 Selling and administrative expenses: Variable selling and administrative expenses $116,400 Fixed selling and administrative expenses 45,100 161,500Explanation / Answer
Req 1: Construct The Absorption Costing Unit Product Cost Aug Direct Material 33.30 Direct labour 16.00 Variable Manufacturing overheads 8.00 Fixed Manufacturing overheads 5.30 Absorption costing unit prroduct cost 62.60 Construct the Absorption Costing Income Statement Aug Sales $855,000 Cost of Goods sold 594700 Gross Margin $260,300 Selling and distribution expense 161,500 Net operating income 98,800 Req 2 Compute the Variable costing Unit Product cost Aug Direct Material 33.30 Direct labour 16.00 Variable Manufacturing overheads 8.00 Variable costing unit prroduct cost 57.30 Construct The Variable Costing Income Statement Aug Sales 855,000 Less: Variable cost variable cost of goods sold 544,350 Variable selling expense 116,400 660,750 Contribution margin 194,250 Fixed expense: Fixed Manufacturing overheads 63,600 Fixed selling expense 45,100 Net operating Income 85,550